Legislature votes to assume power over BGE merger

Fast action allows time for override if Ehrlich vetoes bill

General Assembly

The General Assembly approved a bill yesterday that would give the legislature veto power over the proposed merger between the corporate parent of Baltimore Gas and Electric Co. and a Florida utility, perhaps the strongest bargaining chip lawmakers have to force concessions in talks over a 72 percent increase in electric rates due this summer.

The bill went to the desk of Gov. Robert L. Ehrlich Jr. on a day of intense negotiations between Constellation Energy Group and top lawmakers in which the utility argued that the merger is the only way to guarantee lower rates for BGE consumers.

Electric rates for the utility's 1.2 million residential customers are set to go up July 1 by an annual average of $743 per household.

The governor supports the merger and has hinted that he would veto the legislation, but the bill was passed with enough time so that legislators could override a veto before the end of the session.

Today is an important deadline. With 10 days to go in the General Assembly session, Ehrlich can veto any bills passed after today without allowing legislators the chance to override him before they adjourn.

But utility-related bills that the legislature passes today will give lawmakers greater influence in negotiations with the power company through the end of the session, and beyond, if they follow through with override votes.

More bills designed to give the General Assembly maximum leverage over Constellation continued to speed through the legislature, with favorable committee votes yesterday on measures to force the company to return $528 million to customers and to effectively fire the members of the Public Service Commission, who have come under intense criticism in recent weeks for being too pro-utility.

"Finally, the citizens of the state are going to have an advocate to stand up for them so they don't get rolled again," Sen. Paul G. Pinsky, a Prince George's County Democrat, said before the Senate gave final approval to the merger bill.

Threat of disaster

Constellation Chief Executive Officer Mayo A. Shattuck III said after a morning meeting with the governor and legislators that he understood the politics behind the fast-tracking of such legislation but he said that disrupting the merger could have disastrous consequences for customers in the long run.

"It's leverage against getting to a resolution, but I think they have a much better understanding of the implications of stopping the merger," Shattuck said. "At the end, I hope we come to a solution that is both palatable and allows the merger to go through."

The impending rate increase is the result of the scheduled lifting of BGE residential rate caps instituted as part of a deregulation plan for Maryland's electric industry, approved by the General Assembly and other government officials in 1999 and 2000.

The limits are being lifted amid price spikes in world energy markets caused by Hurricane Katrina and instability elsewhere in the world.

The prospect of sharply higher energy bills hitting Marylanders just months before an election has sent Annapolis into a frenzy, with lawmakers of both parties clamoring for a way to moderate rates.

Earlier this week, Constellation offered a transition plan for customers that would allow an initial 15 percent increase in the rates and bring customers up to market price for electricity in stages over 18 months. The company would borrow money with government backing to make up the difference.

It would charge customers an average of $8.54 a month to repay the principal, but the company has offered to cover the interest. Constellation officials have said the deal is contingent on approval of the merger.

Legislators said that offer isn't good enough. Senate President Thomas V. Mike Miller said after the morning meeting with Shattuck and other Constellation officials that the BGE legislation will continue to go forward.

"We told them where the citizens of Maryland need to be in terms of lower rates," Miller said. "BGE is definitely going to come off the proposal they made last time, but what number that will be remains to be determined."

After a second meeting with Shattuck and legislative leaders, Ehrlich would not confirm figures discussed at the meeting except that the plan on the table involves an initial 15 percent increase. He characterized yesterday's meetings as progress and said negotiations would continue with a discussion slated for 4 p.m. today.

But the governor expressed his opposition to the House's merger bill and the Senate proposal to overhaul the embattled Public Service Commission, suggesting he would veto both.

"The bills we have seen, for the most part, have nothing to do with rate stabilization," he said. "They are all about politics or about legislative intrusion into the executive branch."